Conflict of interest versus independence: the board of directors’ dilemma

If you are not yet convinced about the damages that a conflicted board of directors can cause to investors, I suggest you read the article "The Other Offshore Disaster" published in the New York Times.
The author comes back on some of the circumstances that led to the loss of around $1.6 billion in 2007 by investors in the Bear Stearns's hedge funds.
He demonstrates that the existing conflict of interest due to the tight working relationship between Walkers Global and Bear Stearns led the two "independent directors" of the fund to take wrong decisions at the detriment of the funds' investors.
The article also demonstrates the failure of Bear Stearns to spot unlawful trading by the portfolio manager which probably contributed to the massive loss.
The quality of the board of directors should be a top priority for hedge fund investors as I have already advocated numerous time in my blog. Directors are potentially in a privileged position to spot problems that investors will only be able to catch after it is too late.
The needed change in hedge funds corporate governance needs to be investors led, so please before you invest looks who are the individuals who may be the last rampart to keep you investment safe.
To read the New York Times Articles click here.